# What is the AAR for this problem?

could you show the process of your calculation? Thanks. ---------------------------- || year1------- || year2------ || year3------- || year4 Sales-------------------- || \$480,000 || \$520,000 || \$640,000 || \$420,000 cash expenses------ || \$220,000 || \$180,000 || \$360,000 || \$140,000 Depreciation---------- || \$200,000 || \$200,000 || \$200,000 || \$200,000 Earnings before tax || \$60,000 || \$140,000 || \$80,000 || \$80,000 Taxes (30%)---------- || \$18,000 || \$42,000 || \$24,000 || \$24,000 Net Income------------ || \$42,000 || \$98,000 || \$56,000 || \$56,000

I assum they are us SL for depreciation and a zer salvage value. so the asset is 800,000-0/2= 400,000 avg NI= 42000+98000+56000+56000/4= 63000 63000/400000= 15.75%

correct. I didn’t realize that the only asset is the the depreciable asset. So I was looking for book value but couldn’t find it. Thanks again.

no problem portfolio

What is AAR? from what you’ve done, it seems average NI / Average Assets. Why do you call it AAR? I think it is ROA.

I forget its either average accounting return or accounting average return

Average accounting return = average project earnings after taxes and depreciation/average cost of the investment

map1 Wrote: ------------------------------------------------------- > Average accounting return = average project > earnings after taxes and depreciation/average cost > of the investment what chapter is this term in?

corp finance i believe